An uncertain future lies ahead for four refin
    eries of north east India. The Government
    of India’s duty restructuring has hit the balance sheets of these companies and their very existence is in peril. The duty adjustments is expected to cost the refiners `1900 crore annually.
Reduction of custom duty on crude oil from 5% to nil, custom duty reduction of petrol, diesel from 7.6% to 2.5%, lowering of excise duties on diesel from `4.60 per litre to `2 per litre and increase of VAT on crude oil from 4 % to 5% besides the imposition of 2 % entry tax by the Assam government and an increase in pumping tariff rates have impacted the already strained profitability of the four refineries.
Refineries of the region get 50 percent excise duty benefit which is the oxygen for the survival of the four refineries which is of sub-economic size.
To compound the state’s woes, the Union Ministry of Petroleum has decreased the royalty rate of crude oil from 16.66 percent to 20 percent. A major part of Assam’s revenue comes from royalty and tax paid by the refineries.
Digboi Refinery with a capacity of 0.65 million metric tones per annum (MMTPA), will suffer a loss of almost `200 crore, Numaligarh Refinery with refining capacity of 3 MMTPA will lose around `765 crore per annum.
The Guwahati refinery has the processing capacity of one MMTPA and Bongaigaon Refinery & Petrochemicals Limited (BRPL) has 2.35 MMTPA refining capacity. Refineries of Digboi, Guwahati and Bongaigaon are of Indian Oil Corporation Limited while in NRL, Bharat Petroleum Corporation holds 61.65 %, Oil India Limited (OIL) 26% and the Government of Assam has 12.35% stake in the refinery.
The four refineries in Assam annually require 7 million tones of crude oil to run. Around 1.5 million tones of Rava crude is imported annually
Besides this, even the expansion project has been hard hit by the restructuring. Bongaigaon Refinery’s ambitious project, Indmax is hanging over a fire after the Government of India slashed the excise duty benefit of the refineries. This `1800 crore project is expected to bring down the deficit of LPG in north east India significantly which at present has an annual deficit of 75,000 tones of LPG. This will increase to 3, 75,000 tones by 2050. This value added project will convert black oil into LPG/petrol.
The Executive Director of Bongaigaon Refinery said this project will produce 2 lakh tones of LPG annually and will significantly reduce the LPG deficit. Despite local production of LPG, north east India imports LPG through the Haldia port.
The four refineries of the region have taken up the issue of excise duty with the north east MPs forum. Assam Chief Minister, Tarun Gogoi has taken up the issue with the Finance Minister Pranab Mukerjee and Prime Minister Dr. Manmohan Singh.
Tarun Gogoi has pleaded with the Prime Minister Dr. Manomohan Singh that the oil producing companies pay royalty to the state on the well head price determined by the actual price of equivalent crude oil prevailing in the international market and not on the sale price as defined of the Ministry Petroleum & Natural Gas.
Gogoi met Dr. Singh in New Delhi recently and pleaded for 100% excise duty exemption to NRL in the wake of serious adverse impact on NRL and the viability of three other oil refineries in the state owing to reduction of customs duty on crude oil by the Government of India from 5% to 0% and reduction of excise duty on diesel by `2.60 per litre.
Gogoi said, “The four refineries are the only ones in the country to be wholly dependent on indigenous crude oil.” The Chief Minister asked Dr. Singh to consider granting 100% excise duty exemption to the refinery at least during the current financial year.
Under payment of oil royalty by ONGC and Oil India Limited (OIL) to Assam is another area which is dogging the state government which has resulted in a loss of revenue for the state of Assam. The issue has also figured in the CAG report for the state of Assam, which estimates the loss at `525 crore over a period of 11 months during 2008-2009. Under payment of royalty to the state is still continuing and is in fact increasing.
The Chief Minister argued that the royalty on crude oil may be made effective at 20% by modifying the present royalty calculation formula. The Chief Minister pointed out that the withdrawal of the proviso of protection of state royalty by the Ministry of Petroleum & Natural Gas in May 2008 has caused loss of royalty due to discounted price. It appears that a part of the under-recoveries of the Central oil marketing PSUs are indirectly being recovered from the tax revenue of the state.”
IOCL Chairman, R.S Butola is however optimistic that the Finance Ministry will consider the request of the refineries. The Ministry of Petroleum and Natural Gas has already recommended 50 per exemption.
He added, “Substantial amount of oil is sent outside the region after refining. Lowering of custom duty is going to affect our operations and viability.”  
Gogoi said that he will take up the matter once again with the Government of India. “I will not allow our refineries to become non - viable and I am sure that the Government of India too does not want them so. Oil and gas resources are yet to be properly tapped in Assam.”
Sunaina